From: CLAIRE JIMENEZ
Sent: Wednesday, June 29, 2005 1:02 PM
To: Comments; reqs.comments@federalreserve.gov
Subject: Comments on Interagency Proposal on the Classification of Commercial
Credit Exposures
Dear Mr. Feldman and Ms. Johnson:
The Alabama Bankers Association, which represents over 140 commercial
banks
with over $200 billion in total assets doing business in 19 states,
would
like to submit our objections to the commercial credit classification
proposal. Our membership includes four of the top 50 commercial banks,
and
range in size from $13 million to $84 billion.
We contend that the current system of classifying credits is
well-understood
by examiners and bankers. We all understand the meanings of
'Substandard',
'Doubtful', and 'Loss' and generally apply the same standards when
classifying loans. To adjust to a system as complex as the one
proposed
would simply be inefficient and counter-productive.
The reasons asserted in support of adoption of this proposal include a
need
to reduce split classifications of credits, inconsistencies in the
application of credit
classifications, and ambiguity in the current system. We do not believe
that
such widespread deficiencies exist in the current system. We also
believe
that the current system is well-understood, has served us well for
decades,
and when correctly applied, accomplishes more than the proposed
system.
The proposal should be withdrawn. It is flawed in its assumption that
split
classifications can be reduced by adopting a framework that splits the
evaluation of all loans into two tiers. It is itself replete with
ambiguities and
invites the very inconsistencies which it purports to minimize.
Contrary to the assertions made within the proposal, there is
absolutely
nothing new in this proposal that isn't already addressed by the
current
system. The most this proposal will do is require our loan officers
and
examiners to expand their current classification vocabulary from five
relatively clear and concise definitions to some eighteen ambiguous
definitions. Adding ratings with different names which are separate
and
distinct from those used for all other asset categories will cause
additional confusion. Tremendous inefficiency will ultimately result
from
the unnecessary debate over the meanings and application of these new,
ambiguous categories.
If adopted, it will replace a well-understood system with a confusing
one
which will require tremendous resources for implementation and training
of
loan officers and examiners. The time and effort required to implement
the
proposed system should be reallocated to issues more pressing to the
industry. Additional training to address inconsistencies (if such
inconsistencies actually exist) in the application of the current
system
would cost far less than implementation of the proposed system. Such
costs
to implement this proposal amount to an additional imposition of
unnecessary
regulatory burden. Our discussions with our banks, of all sizes,
indicate
little support for this proposal for this very reason.
Again, when regulatory relief is of paramount concern to the industry,
it is
completely objectionable for you to move forward with a proposal as
burdensome as this one. We firmly believe that the proposal should be
withdrawn. Please feel free to contact us should you require any
further
details, and thank you for allowing us to comment on this proposal.
Sincerely,
Alan Worrell
Chairman and CEO
Sterling Bank
President, Alabama Bankers Association
Montgomery, AL 36106
Tom Layfield
Alabama Bankers Association
